Factbox: Safe havens emerge in China, South Asia as recession risks grow


HONG KONG/SYDNEY (Reuters) – Fears of a global recession are on the rise as the U.S.-China trade war re-escalated in May, sending investors to the safety of U.S Treasuries, the Japanese yen and gold.

But in Asia, investors are exploring new sanctuaries, from Chinese consumer stocks to Thai government bonds, some of which have thrived despite their economies’ exposure to tariff threats.

While not all investors or analysts are predicting a global recession, several shared their thoughts on where they would take shelter in Asia if a sharp downturn occurred, and why:

NAME JOB TITLE BASE CASE TRADING COMMENTS

IDEA-GLOBAL

RECESSION

SCENARIO

Khiem Do Head of Recession Long “We can see

Greater risk<20%;but defensive a scenario

China trade war stocks in where the

Investments escalation China, India Chinese

at BARINGS risk to – equity

forecasts. Utilities, market,

expressways, particularly

consumer A-shares can

staples, outperform

telecoms & the rest of

healthcare the world,

sectors. especially

if the

Chinese

government

were to

significantl

y ease

fiscal and

monetary

policies”

JC Sambor Deputy Head 45% chance Long Korean “If I’m a

of Emerging of trade war and Thai Korean

Market Fixed de-escalatio government investor,

income at n; 45% local under such a

BNP PARIBAS chance of currency scenario,

ASSET response bonds for I’d be

MANAGEMENT from U.S., correlation selling all

China with U.S. my Samsung

policymakers Treasuries; stocks and

to offset long high buying local

trade war yield Asian KTB (Korean

escalation; credit hard Treasuries).

10% no currency; “

policy would add

response on Chinese

trade war government

escalation. bonds.

John Woods Chief Not seeing Long “Yen is the

Investment recession; investment Swiss franc

Officer, see some grade credit of Asia, as

APAC, CREDIT weakness in over they say. I

SUISSE industrial equities. don’t see

production Within that

globally. equities, changing any

favor time soon.

markets with We

strong anticipate

domestic yen strength

consumption in periods

components. of

volatility.”

Rob Mumford Investment Expects Long ‘bond In Chinese

Manager, U.S., China proxies’ equities,

Emerging to reach a investment “you can

Market trade deal. grade-rated have equity

Equities at companies, exposure to

GAM consumer the major

INVESTMENTS staples, in internet

markets more names,

reliant on Alibaba,

domestic Tencent,

consumption. which are

skewed more

domestically

.”

Kerry Craig Global Recession Increasingly “More and

Market not base defensive, more

Strategist case; seeks investors

at JP MORGAN ‘cautious’ returns that are looking

ASSET towards are ‘not for

MANAGEMENT global tied to the diversificat

markets. economic ion beyond

outlook’ in the typical

real assets, stocks and

infrastructu bonds.”

re,

transport

leases

globally.

Robert Mann Portfolio Prefers “The

Manager at Chinese long-term

NIKKO ASSET consumption fundamentals

MANAGEMENT stocks, for India

companies look good,

related to particularly

services – with Modi

healthcare, with a

education, strong

domestic mandate.

tourism. “The only

Overweight hiccup in

India, the

Indonesia short-term

is a lot of

this is

already in

the price.”

Sat Duhra Asia “Bond “In terms of

ex-Japan proxies” equities the

portfolio such as performance

manager at listed of

JANUS infrastructu ‘bond-proxy’

HENDERSON re assets, type stocks

INVESTORS REITS, eg REITs and

telcos. infrastructu

Domestic-foc re assets

ussed has been

companies in strong this

China year, money

seems to

have rotated

away from

exporters

and tech

into less

cyclical

names with

domestic

exposure vs

global trade

exposure.”

Andy Wong Senior Recession Australian “There

Multi-Asset not base government aren’t many

Investment case; U.S., bonds to do safe haven

Manager at Chinese well (as assets in

PICTET ASSET policymakers local Asia and we

MANAGEMENT have levers economy and may wind up

to pull if property back to the

needed. market may ‘buy bonds

struggle), for capital

gold, listed appreciation

gold and buy

producers, stocks for

and yield’

defensive environment.

equities “

with steady

yield and

cashflow.

Robert Mead Co-Head of 15-30% Favors U.S. “If the

Asia-Pacific probability Treasuries, economic

Portfolio of world Australian backdrop

Management recession. government evolves into

at PIMCO bonds. Likes recession

Chinese then bond

government markets

bonds, still have a

though notes fair way to

they are go.”

less liquid. “If

developed

economies

were to be

in recession

then bonds

will perform

very

strongly.”

Dwyfor Evans Head of APAC Recession Favors South “The problem

Macro probability Asia – for North

Strategy at low, should India, Asia is that

STATE STREET not Indonesia – they are so

GLOBAL overstate – economies beholden to

MARKETS U.S., China that rely global

domestic more on conditions.

economies domestic That’s less

still consumption. of an issue

holding up. South Korea, for India or

Taiwan Indonesia

vulnerable. because they

are less

demand-drive

n.”

Mark MD, global Sees Modest “With the

Schofield strategy & downside overweight outlook

macro group, risks to on EM uncertain,

CITI global equities our asset

growth. with Asia allocation

focus, U.S. remains

Treasuries. conservative

. Keeping

powder dry

and being

alert to

future

opportunitie

s seems the

best

strategy.”

Weekly note BLACKROCK N/A Overweight “Economic

(June 3) U.S., EM, reforms and

Asia policy

ex-Japan stimulus

equities and support EM

U.S. stocks.

municipal Improved

debt over consumption

3-month and economic

horizon. activity

from Chinese

stimulus

could help

offset any

trade-relate

d weakness.

We see the

greatest

opportunitie

s in EM

Asia.”

Sean Darby Global N/A Like “In the

Equity convertible short term,

Strategist bonds positioning

at JEFFERIES has become

(from a so bearish

note) that ‘a

ceasefire’

could spark

a risk

rally… CBs

offer equity

‘optionality

‘ with low

volatility

alongside

reduced

drawdowns.”

Reporting by Noah Sin in HONG KONG and Swati Pandey in SYDNEY; Editing by Shri Navaratnam

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